The money measurement assumption underlines the information that in accounting each worth-recording event, occurrence or transaction is recorded in terms of money. In accounting, only those trade transactions and events which are of financial character are recorded. For example, when Sales Manager is not on good terms with Production Manager, the business is bound to endure. This reality will not be recorded, because it cannot be measured in terms of money.
Money Measurement Concept in accounting, also known as Measurability Concept, means that only transactions and events that are competent of being measured in monetary conditions are accepted in the financial statements. All transactions and events recorded in the financial statements must be reduced to a element of monetary currency. Where it is not potential to allocate a dependable monetary value to a transaction or event, it shall not be recorded in the financial statements.